3 instances to consider selling your MF?

When it comes to mutual funds or even stocks for that matter, people are in real hurry to sell it off. There are two instances when people think of selling, either when the price or NAV (Net Asset Value) is moving up or when the price or NAV is moving down. When NAV is rising, people sell in a fear that they would lose on the current profit . In a falling NAV scenario people sell it in a fear that they may face further losses. However, there are certain things that investors should consider before selling or redeeming their MF units.

Rebalancing
Rebalancing your investment portfolio periodically is equally important as determining your asset allocation. Rebalancing helps you to restore to your pre-determined asset allocation. Restoring to pre-determined asset allocation in turn helps you to maintain your risk and returns outlook. So, while carrying out rebalancing activity you may need to sell units of the funds that has moved beyond desired weightage. Say for instance, you have placed a weight of a fund at 20 per cent and due to movement in stock market/bond market it becomes 25 per cent. So here, you need to sell 5 per cent to restore to your pre decided asset allocation of 20 per cent.

Financial goals
Investing vaguely turns to be an unproductive affair. So, it is always better to link them to your financial goals to get optimal portfolio that suits your financial goals and risk. When you reach your goal you would require that accumulated money. Now, you need to sell your mutual fund units to get that accumulated amount to spend for your desired financial goal.

Performance
Mutual fund performance is very dynamic in nature and investors may witness various things responsible for the same. The deterioration of the performance due to external conditions like economy, stock market volatility, etc. is fine. But if it is due to internal situations like fund house’s investment philosophy, internal politics, corporate governance issues, frequent changes in fund manager, etc. then there are high chances of fund not surviving in the future. So, selling units of such funds and investing it in some better funds should be the stance.